Strategic Business Development is crucial to the long-term prospects of most venture-backed companies. The alliances you form, the agreements you sign and the path you take all work to attract - or repel - your eventual acquirer - and the price!
This blog aims to discuss lessons learned during >25 years in business development for the software industry.

Thursday, August 13, 2009

I am not sure who coined the phrase in today's title, but all of us in high tech can relate to it!

Unlike buying and selling real estate or even a car, forming a strategic alliance doesn't end with the signing and announcement of the contract. That's why an alarmingly high percentage of alliances "fail" over time - alliances are more like marriages: they require attention and an evolutionary approach in order to remain relevant, vital and important to both parties. Expectations, business imperatives, and people all change over time and so must the alliance.

So, how does a company improve its chances of being on the successful side of the ledger? While the real answer will depend on the parties and details involved in a specific alliance, following a few careful steps can make the difference.

Consider what "success" and "failure" mean - both to you and to your partner. Often, an alliance will seem to be running well for one party, and horrible to the other. Take steps to understand the changing metrics that your business and your partner's business use to measure success, and adjust accordingly.

While "Win Win" is a rather hackneyed term, targeting to follow the curve of success for both parties will increase the odds both parties are in for the long haul

Maintain executive contact - particularly through organization changes and periods of stress. Just like a marriage :-) Required Quarterly business reviews with sponsoring Executives is essential. Make sure they happen!

Don't be afraid to change the fundamental basis of the alliance if you see things going horribly awry. Consider alternative ways to work together, generate incremental revenue or improved market position for your company - think out of the box. For example, if you have a product licensing arrangement and your partner isn't happy with the selling relationship or profit margin, propose a well-considered alternative to increase margins and self-sufficiency. Remove the pain.

Successful alliances take work - not just at the start when the lights are on, and the stage is filled with music, but during the darkest hours when tempers are frayed and there's grumbling in the wings.

Does anyone have a story of an alliance saved from the dead by a well-considered change of course? Please tell!

Saturday, August 1, 2009

There is nothing like 2 3-hour sessions using a chainsaw to cut a pile of wood in the Texas summer to focus your mind on something - something other than cutting hard, aged oak!

I have spent a great deal of time over the past 3-4 years with my friend and colleague, John Soper of New Paradigms Marketing Group, talking through the various phases of the Alliance Spectrum and when and how various transitions occur (or can be made to occur) during the discovery, formation, management and endgame (or rebirth) of each alliance. One of the most important transitions to understand or control is when negotiations begin and end, understanding how to determine those points, and what to do to optimize your desired outcome.

Some would say negotiations start explicitly when one party presents business terms, starts drafting a contract, or sends one of those "we never change it" standard form agreements to the other party. At least then, I say. In fact, in my view (and I think John shares this view), a good approximation for determining the starting point of negotiations is to find the date when the two companies first sat down together to identify a joint value proposition for the relationship. At that point, with quick minds at the table and a solid understanding of the technologies and business parameters involved, each side has the opportunity to start the negotiations and gain advantage. Identifying ways that fit your company's strategy where capabilities might fit into your partner's strategy, laying out key facts, market realities, technical or market capabilities that set the direction for the alliance from the start. And, most importantly, doing so while establishing the new value created for the other party. As I said, quick minds are needed as one usually doesn't enter the meeting with enough information to predetermine those points. You may not even enter the meeting realizing that you are about to start negotiations.

Missing the opportunity is not deadly. But, for a small company the ability to direct the joint value position in the most positive light for your company at an early stage can be the difference between success and failure in forming the alliance, and in maximizing the benefits. It doesn't always happen then, but you can make it happen then by choosing your team carefully, and being well prepared.

So, next time you walk into a meeting or a call with a potential partner, it might be the one. Make sure you are prepared, and have the right people with you to seize the moment!

So, where do chainsaws come into this? Well, I really have been pondering this blog the last two days while cutting a pile of wood into logs for this fall. But, it also occurred to me that it is a wise strategy to approach each cut as if it could be the one where the blade slips, and one that has kept me safe for 15 years of happy sawing!